ATLANTIC GOLD CORPORATION MANAGEMENT ...atlanticgoldcorporation.com/_resources/financials/AGB-Q2...4 OVERVIEW OF THE COMPANY’S HOLDINGS MRC PROJECT The MRC Project currently comprises

ATLANTIC GOLD CORPORATION MANAGEMENT DISCUSSION & ANALYSIS FOR THE SIX MONTHS ENDED – JUNE 30, 2017 AND 2016

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INTRODUCTION

This MD&A has been prepared as of August 24, 2017, and should be read in conjunction with the

Company’s unaudited condensed interim financial statements with accompanying notes for the three and

six months ended June 30, 2017, as well as the audited consolidated financial statements with

accompanying notes for the years ended December 31, 2016 and 2015, which have been prepared in

accordance with International Financial Reporting Standards (IFRS) as issued by the International

Accounting Standards Board.

The objective of this MD&A is to help the reader understand the factors affecting the Company’s past and

future financial performance. All amounts are reported in Canadian dollars, unless otherwise stated.

Additional information on the Company, including the Company’s Annual Information Form can be found

in the filings with Canadian security commissions on SEDAR at www.sedar.com.

Cautionary Statement Regarding Forward-Looking Statements

This MD&A contains “forward-looking statements”. Forward-looking statements include, but are not

limited to, statements with respect to the Company’s current review of potential mineral project

investments and/or acquisitions, the estimation of mineral resources, the timing and content of upcoming

programs, the realization of mineral resource estimates, the timing and amount of estimated future

production, costs of production, capital expenditures, success of mining operations, environmental risks,

unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In

certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects”

or “does not expect”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”,

“anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements

that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be

achieved”. Forward-looking statements involve known and unknown risks, uncertainties and other factors

which may cause the actual results, performance or achievements of the Company to be materially

different from any future results, performance or achievements expressed or implied by the forward-

looking statements. Such factors include, among others, actual results of planned expansion activities;

changes in project parameters as plans continue to be refined; future prices of resources; exchange rates

for Canadian and other currencies; possible variations in grade or recovery rates, accidents, labour

disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or

in the completion of development or construction activities. Although the Company has attempted to

identify important factors that could cause actual actions, events or results to differ materially from those

described in forward-looking statements, there may be other factors that cause actions, events or results

not to be as anticipated, estimated or intended. In making the forward-looking statements in this MD&A,

the Company has made certain key assumptions, including, but not limited to, the assumptions that

merited mineral assets or projects can be acquired and financings are available. There can be no

assurance that forward-looking statements will prove to be accurate, as actual results and future events

could differ materially from those anticipated in such statements. Accordingly, readers should not place

undue reliance on forward-looking statements. The Company undertakes no obligation to update or

revise any forward-looking statements or information made in this MD&A, except as required under

applicable securities legislation.

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C O M P A N Y P R O F I L E

Atlantic Gold Corporation (“Atlantic”, or the "Company") is a company listed on the TSX Venture

Exchange with a registered office at Suite 3083, Three Bentall Centre, 595 Burrard Street, Vancouver,

B.C. Canada.

The Company is a Canadian-based exploration and development gold mining company engaged in the

acquisition, exploration and development of precious metal mineral properties. Atlantic’s strategic focus is

a counter cyclical strategy of acquiring advanced projects in mining-friendly jurisdictions.

KEY MILESTONES AND OUTLOOK

Significant developments during the period include the following:

• Construction and commissioning at the Moose River Consolidated mine;

• Further drawdowns on the Company’s Project Loan Facility in the amount of $63.4 million;

• Completion of the Company’s resource definition drilling program and mineral resource update at

Cochrane Hill and Fifteen Mile Stream deposits;

• Submission of an Environmental Impact Statement for the Beaver Dam deposit.

Other corporate development milestones achieved or ongoing include the following:

• Completion of a Pre-Feasibility Study technical report for Cochrane Hill and Fifteen Mile Stream;

• Planning for Cochrane Hill and Fifteen Mile Stream Environmental Impact Statement.

Construction Development Update

Construction of the Moose River Consolidated mine is progressing as planned with commissioning having commenced in August 2017. During the six months ended June 30, 2017, the Company completed the construction of the grinding building, the laboratory building, completion of the ball mill installation and power installation at site. Construction of the truck shop and warehouse had commenced. The Company continues to focus on infrastructure construction and tailings facility construction completion. All major equipment for pre-production has been delivered and the fleet will be expanded as the mine moves towards full operation. The project remains on schedule and on budget in all material respects. The Company has incurred approximately $103 million in construction and development expenditures as of June 30, 2017. As at the date of this report, the plant site construction was approximately 95% complete.

Next Steps

Over the coming months, the Company will be focused on:

• Completion of construction of the Touquoy Project and commissioning in September 2017;

• Completion of a Pre-Feasibility Study technical report for Cochrane Hill and Fifteen Mile Stream

as well as additional future step out and new exploration drilling to be completed later in 2017 and

in 2018 on both deposits.

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OVERVIEW OF THE COMPANY’S HOLDINGS

MRC PROJECT

The MRC Project currently comprises two deposits in close proximity, Touquoy and Beaver Dam, which have been the subject of a feasibility study for development. A technical report is available on the Company’s website at www.atlanticgoldcorporation.com. Upon finalization of the feasibility study technical report, the Company made the decision to move forward with the development of the MRC Project. The two deposits are planned to be mined and processed through a central milling facility presently under construction at Touquoy.

A. Touquoy Deposit

Description and Ownership

The Touquoy deposit is located at the former village of Moose River Mines about 70 minutes’ drive via 110km of sealed road north-east from the provincial capital of Nova Scotia, Halifax.

The Touquoy deposit is secured under a Mineral Lease (ML11-1) comprising 49 claims and a surrounding exploration license (EL10377) comprising 64 claims, the total of both titles covering an area of approximately 1,760 ha.

The Company’s effective ownership interest in Touquoy is 63.5%. The Company is entitled to recover all operational, overhead, financing and sunk costs prior to any distributions to its non-public partner, in the project.

A net smelter return royalty (“NSR”) of 3% is also payable in respect of the Touquoy deposit, two-thirds of which can be purchased for $2.5 million. The Company expects to exercise this buy-back option on Touquoy. In addition to the NSR, Touquoy is subject to a 1% royalty payable to the government of Nova Scotia.

The Touquoy deposit is well advanced with all major environmental permits. Environmental assessment approval and industrial approval are in place and a mineral lease has been granted.

In addition, ownership of all 63 private properties required for the development of the Touquoy deposit has now been secured. For 11 of these properties, the final compensation settlement related to land expropriation has not yet been finalized and is under review with legal representatives of former landowners, but Atlantic Gold has full rights to utilize these properties.

In relation to the seven parcels of Crown land required within the footprint of the Touquoy deposit the Company finalized a lease agreement in February 2016, providing the Company with all remaining surface and sub-surface rights necessary to progress the MRC Project to construction.

B. Beaver Dam Deposit


The 100% owned Beaver Dam Property is located in Halifax County, in central Nova Scotia, approximately 85km northeast of the provincial capital of Halifax (Figure 4.1). The property covers the historical Beaver Dam Gold District located on NTS sheet 11E02/A with central coordinates of 521319 E / 4990700 N (UTM NAD 83 Zone 20). The area is uninhabited with the closest residences situated 5 km away.

http://www.atlanticgoldcorporation.com/

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The property is held under a single exploration license, EL50421, currently held by Annapolis Properties Corporation, a wholly owned subsidiary of the Company. EL50421 is comprised of 76 contiguous claims which cover an area of approximately 1,184 ha.

For Beaver Dam, a 0.6% NSR is payable to a private third-party. There are no buyback options for this private royalty. Similar to Touquoy, Atlantic must remit a 1% NSR on production from Beaver Dam to the government of Nova Scotia.

Feasibility Study – MRC Project

On July 02, 2015, the Company announced the results of a Feasibility Study (the “Study”), led and

prepared by Ausenco Engineering Canada Inc. (“Ausenco”) in accordance with National Instrument 43-

101 (“NI 43-101”) in respect of the Company’s MRC Project. The Study considers the co-development of

Touquoy as well as Beaver Dam.

The Company engaged a team of specialized consultants, led by Ausenco, with the assistance of Moose Mountain Technical Services (“MMTS”) in respect of mine design and pit optimization as well as compiling the economic results for the project. The Company also engaged Stantec Consulting Ltd. in respect of the design of the Tailings Management Facility, Mr. Neil Schofield, a principal of FSSI Consultants (Australia) Pty Ltd. (“FSSI”) in respect of the resource modelling, and Conestoga-Rovers & Associates (“CRA”) in respect of environmental and permitting aspects of the Feasibility Study.

Production Profile

The table below sets out gold production from the MRC Project over the life of mine:

MRC Project Life of Mine Production

DescriptionWaste (000’s

tonnes)

Ore Processed

(000’s tonnes)

Gold Production

(000’s oz.)

Pre-Production 2,639 0 0

Year 1 5,616 1,800 74

Year 2 4,897 2,000 96

Year 3 4,174 2,000 94

Year 4 3,274 2,000 92

Year 5 14,384 2,000 77

Year 6 14,368 2,000 90

Year 7 9,170 2,000 90

Year 8 2,686 2,000 85

Year 9 99 652 16

Total LoM Production 61,307 16,452 714

Overall Strip Ratio 3.73

The Study is based on the deposits being developed as conventional surface open pit mining operations with drill/blast/load/haul activities utilizing a leased production fleet operated by Company employees. Initial production will commence at Touquoy where the relatively low strip ratio and short haul to external waste dumps translates to a smaller production fleet, minimizing production costs in the process.

Beaver Dam, as a satellite operation, will require minimal infrastructure to supply basic office facilities and equipment maintenance requirements. The mining fleet at Touquoy will be transitioned to Beaver Dam

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and expanded due to the higher rate of material movement. Ore will be crushed at a location adjacent to the Beaver Dam pit near Highway 224 and then loaded onto highway trucks which will transport it along a combination of private logging and public roads to the Touquoy processing facility. Beaver Dam waste rock will be placed as close to the pit as practical to minimize waste haulage costs. Other than primary crushing, there will be no treatment of material at Beaver Dam and therefore no plant or tailings management facility is required there. A PEA prepared for the MRC Project released in October, 2014 estimated a total of 294,000 oz. of gold to be recovered at Beaver Dam. As a result of the resource drilling program conducted in 2015 at Beaver Dam to raise the majority of the resource to measured and indicated classifications following the PEA, the recovered gold at Beaver Dam has increased to 315,000 oz., with a related increase in tonnes processed as well as waste tonnes mined.

Metallurgical testing indicates that Beaver Dam ore will have treatment characteristics similar to the Touquoy ore and will therefore be processed in the same manner as the Touquoy ore. Tailings generated from treating the Beaver Dam ore is planned to be placed in the mined-out Touquoy open pit. After all mining is complete, the Touquoy pit will continue to fill with water and the tailings will be settled well below the expected final maximum water surface level. Permanently sealing tailings below water is globally considered a preferred method for long term tailings disposal.

Processing and Metallurgy The processing of Touquoy ore has been extensively tested and the flow sheet to be constructed has been defined. The plant will have a capacity of 2 million tonnes per year with an expected gold recovery of 94%.

MRC Project Flowsheet

The flow sheet is conventional and consists of three stage crushing, ball milling to a grind of 80% passing 150 microns, with cyclones being used to close the grinding circuit. A centrifugal concentrator will be used to treat a portion of the cyclone underflow to recover coarse gold, with gold being recovered from the gravity concentrate by intensive cyanidation. The cyclone overflow will be screened to remove organic particles and then leached in a CIL circuit with a two stage pre-leach. Loaded carbon will be treated in a

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pressure Zadra circuit with the electrowinning sludge smelted to doré. The tailings from leaching will be treated for cyanide destruction using sulfur dioxide / air with a copper catalyst. As previously mentioned, material from the Beaver Dam pit will be crushed and transported to the Touquoy plant. The metallurgical characteristics at Beaver Dam are very similar to the material from the Touquoy pit and as such, no modifications of the plant will be necessary. A similar recovery of 94% is expected. Geology and Mineralization Touquoy and Beaver Dam are geologically similar, being located about 20km apart within the same sedimentary stratigraphy of the Meguma Terrane and along the same structural corridor – the Moose River-Beaver Dam-Fifteen Mile Stream Anticline. In both deposits, gold is disseminated throughout the host rocks – quartz-veined grey argillites (shales), though with a lower work index (~10) at Touquoy than Beaver Dam (~15) owing to a lower proportion of quartz veining at Touquoy. Both deposits extend to the near surface glacial till boundary and are amenable to open pit mining with relatively low strip ratios (2.4:1 at Touquoy and 5.5:1 at Beaver Dam). At Touquoy, most mineralization is disposed around the anticlinal hinge, and at Beaver Dam, mineralization is disposed in a tabular zone within one limb of the anticline. Infrastructure and Power The infrastructure requirements for Touquoy are relatively modest, with minor public road realignment required; and electrical power required to be accessed from a substation at Caribou Mines, a total distance of 13 km, with a large part of the line using existing poles. The power line is being provided by Nova Scotia Power, which has provided a cost estimate for this installation. No mine site accommodation is required as the labour force will come from surrounding communities. The tailings management facility will be constructed from mine waste rock and low permeability till from the mine area, avoiding importation of materials from more distant locations. The tailings management facility will have a positive water balance and therefore will provide process water requirements, but extraction from nearby Scraggy Lake will provide water for startup and in case of dry periods. As all ore mined from Beaver Dam will be trucked to the Touquoy plant for treatment, a significant investment in forestry road upgrades (approximately 20 km in all) will be required. Three bridges and a number of culverts will need upgrading. These improvements will enhance the quality of the existing water crossings for the community and will also provide benefits from an environmental standpoint. Costs will be reduced by using crushed mine waste rock for the majority of the road bed and running surfaces. Road upgrading will be carried out during the fourth year of operation at Touquoy. As only primary crushing will be carried out at Beaver Dam, the electrical power demand at Beaver Dam is relatively small. As there is no appropriate power supply close to the facility, temporary diesel generators will be utilized. Tailings from the treatment of Beaver Dam ore will be stored in the Touquoy pit and no significant cost will be associated with their management. The buildings at Touquoy will remain in use and only temporary workshop, office and change room facilities will be built at Beaver Dam. Environmental and Permitting All major environmental permits are in place for mining and processing operations at Touquoy and background environmental information has been collected at Beaver Dam since the late summer and fall of 2014. The permitting process at Beaver Dam is underway with the relevant authorities. As mentioned earlier, the Company made its formal submission of the Company’s Beaver Dam Project Description to CEAA, of which subsequent notice has been received from CEAA for the commencement of the environmental approval process. Approvals from both the federal and provincial environmental offices are expected to be received in 2018.

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Mineral Reserve Estimate The mineral reserve estimate for the Touquoy portion of the MRC Project is based on a mineral resource estimate contained within the Company’s PEA reported in a Company news release dated September 29, 2014 and filed on SEDAR on October 14, 2014, prepared by MMTS with an effective date of August 1, 2014. The mineral reserve estimate for the Beaver Dam portion of the MRC Project is based on a mineral resource estimate reported in a Company news release dated March 3, 2015 and filed on SEDAR on April 16, 2015, prepared by Mr. Neil Schofield of FSSI with an effective date of March 2, 2015. MRC mineral reserves, shown below, have been developed by Moose Mountain Technical Services with an effective date of July 2, 2015. The mineral reserve is contained within the mineral resource, and is based on the following assumptions:

• Only Measured and Indicated Resource Class materials are included in the reserves;

• A cutoff gold grade of 0.40 g/t is applied;

• In addition to the modelled in-block dilution, a further dilution factor of 1.6% at 0.28g/t gold grade

has been applied to account for mining face dilution;

• Additional tonnes from mining dilution are assumed balanced with lost tonnes due to an

estimated mining recovery of 98.4% at the average diluted reserve grades;

• Mining recovery is reduced to 40% for material between 0.40 g/t and 0.50 g/t gold cutoff grades.

Summary of Estimated MRC Mineral Reserves

Classification MtDiluted Grade

(g/t Au)

Mined Au oz's

(000)

Touquoy

Proven Reserves 2.62 1.41 119

Probable Reserves 6.58 1.45 306

Total Proven and Probable Reserves 9.2 1.44 425

Beaver Dam




Moose River Consolidated




Cut-Off Grade: 0.4 g/t Au

(1) Mineral Reserves are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards on Mineral Resources and Mineral Reserves, whose definitions are incorporated by reference into National Instrument 43-101 -- Standards of Disclosure for Mineral Projects ("NI 43-101").

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(2) CIM Standards on Mineral Resources and Reserves Definitions and Guidelines defines a ‘Proven Mineral Reserve’ as the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that eventual economic extraction is justified.

(3) CIM Standards on Mineral Resources and Reserves Definitions and Guidelines defines a ‘Probable Mineral Reserve’ as the economically mineable part of an Indicated, and in some circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that eventual economic extraction can be justified.

(4) Mineral Reserves are mined tonnes and grade; the reference point is mill feed at the crusher. (5) Diluted grades refer to mining dilution factors applied to the in situ resource grade estimates. (6) The Mineral Reserves information is based on estimates prepared as of July 2, 2015, by

independent Qualified Person, Mr. Marc Schulte, P.Eng., who has the appropriate relevant qualifications, and experience in mining and reserves estimation practices.

There are no known legal, political, environmental or other risks that could materially affect the potential development of the mineral reserve.

The Feasibility Study mine schedule and economic analysis does not include Inferred Resources at MRC of approximately 1.10 million tonnes at 1.40 g/t Au. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Feasibility Study Metrics The table below lists the key Feasibility Study economic metrics for the MRC Project. The economics take into account the fact that the Company's effective ownership in Touquoy is 63.5%, and that the Company will recover all operational, overhead, financing and sunk costs plus cost of capital, prior to any distributions to its privately-owned partner in Touquoy. As of June 30, 2017, the total estimated cost to be recovered under the agreement is approximately $168 million. The Company holds 100% of Beaver Dam.

Highlights of the MRC Project from the Study

Gold price: US $1,200/oz @ $0.80 MRC Project

Pre-tax NPV (5%) $236 million

Post-tax NPV (5%) $168 million

Pre-tax IRR 34.9%

Post-tax IRR 30.0%

Post-tax Payback 2.0 years

The economics have been calculated on an unlevered basis, based on a gold price of US $1,200/oz. and a foreign exchange rate of CAD$1 = USD$0.80. The Feasibility Study has estimated its capital and operating costs, which are detailed in the below table, in Canadian dollars. Substantially all operating costs are Canadian dollar denominated. The tables below show the sensitivity of after-tax NPV and IRR to changes in the US dollar gold price and the CAD/USD exchange rate.

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Sensitivity Analysis on After-Tax NPV

CAD/USD Rate

$168,263 1,000$ 1,100$ 1,200$ 1,300$ 1,400$ 1,500$

0.75 121,644$ 159,007$ 195,961$ 232,870$ 269,627$ 306,338$

0.80 98,248$ 133,306$ 168,263$ 202,873$ 237,465$ 271,924$

0.85 77,643$ 110,651$ 143,596$ 176,431$ 208,972$ 241,519$

0.90 59,142$ 90,469$ 121,644$ 152,751$ 183,672$ 214,393$

0.95 42,310$ 72,354$ 101,932$ 131,465$ 160,956$ 190,140$

US$ Gold Price

Sensitivity Analysis on After-Tax IRR

CAD/USD Rate

30.0% 1,000$ 1,100$ 1,200$ 1,300$ 1,400$ 1,500$

0.75 24% 29% 33% 37% 40% 43%

0.80 21% 26% 30% 34% 37% 40%

0.85 19% 23% 27% 31% 34% 37%

0.90 16% 20% 24% 28% 32% 35%

0.95 13% 18% 22% 26% 29% 32%

US$ Gold Price

The Feasibility Study economics take into account a 1% royalty payable to the Nova Scotia government (no other mining taxes apply), in addition to the following NSR's:

• 1% relating to production from Touquoy, post exercise of buyback options

• 0.6% relating to production from Beaver Dam Income taxes are also accounted for using a 15% Federal and 16% Provincial income tax rate. Capital Costs

Summary of MRC Project Capital Costs ($CDN)

DescriptionTotal Initial Capital

Cost ($ 000)

Total Sustaining Capital

Cost*** ($ 000)

Total Capital Cost

($ 000)

Mine Development 16,948 2,041 18,989

Processing 51,045 3,948 54,993

Tailings Management Facility 9,158 8,572 17,730

Infrastructure 15,447 10,600 26,047

EPCM 9,955 500 10,455

Indirect and Other Costs* 21,523 (4,787) 16,736

Contingency** 13,260 1,903 15,163

Total 137,336 22,777 160,113

*Sustaining Indirect and other costs includes a credit representing the principal balance of a reclamation bond being returned to the Company. **Contingencies are applied according to the degree of certainty of the relevant line item. ***Total sustaining capital costs includes construction capital expenditures at Beaver Dam.

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DescriptionUnit Cost/ tonne

($ 000)Unit Cost/ oz. ($ 000)

Mining* 2.89 304

Processing 11.94 275

Site G&A 2.03 47

Total Cash Operating Costs 626

Total All-In Sustaining Costs** 690

Operating Costs Summary of MRC Project Operating Costs ($CDN)

*Excludes pre-production mining, which is captured under initial capital

**All-In Sustaining Costs excludes Corporate G&A expenses

Mineral Resources

The table below is a summary of the mineral resources at the Touquoy, Beaver Dam and Cochrane Hill

Projects, as well as the resource relating to the Company's Fifteen Mile Stream Gold Project.

Tonnes (m) Grade (g/t) Contained Gold (oz)

Touquoy*

Measured & Indicated 10.1 1.5 480,000

Inferred 1.6 1.5 77,000

Beaver Dam*


Inferred 1.8 1.4 81,000

Cochrane Hill*


Inferred 1.6 1.32 69,000

Fifteen Mile Stream*


Inferred 6.6 1.12 240,000

Total Measured & Indicated 40.7 1.34 1,757,000

Total Inferred 11.6 1.25 467,000

*The Mineral Resources estimates relate to the Touquoy, Cochrane Hill and Beaver Dam deposits summarized in this report and are based on the following key parameters: (1) There are two main styles of gold mineralization, which are reflected in the geological domaining used in the resource modeling; (2) Drill hole sampling has provided a reasonably representative set of samples of the gold mineralization, (3) Multiple Indicator Kriging is an appropriate method for estimating the Mineral Resources in these deposits. Mineral Resources that are not mineral reserves do not have demonstrated economic viability. Touquoy - The Touquoy Mineral Resource estimates presented herein are based on a National Instrument 43-101 technical report entitled "Mineral Resource Estimate for The Touquoy Gold Project, Halifax County, Nova Scotia, Canada" dated August 1, 2014 which has been prepared in respect of the Touquoy Gold Project by FSS International Consultants (Aust) Pty. Ltd. (“FSSI”) of Beecroft, NSW, Australia. These estimates are inclusive of the Touquoy Mineral Reserves presented in the ‘Summary of Estimated MRC Mineral Reserves’ table above. The report is available for review on the Company’s website and on SEDAR (www.sedar.com).


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Cochrane Hill - The Cochrane Hill Mineral Resource estimates are based on a news release dated July 21, 2017, and was prepared in accordance with National Instrument 43-101. The news release is available for review on the Company’s website and on SEDAR (www.sedar.com). Technical Reports, prepared in accordance with NI 43-101, on the resource estimate at Fifteen Mile Stream and Cochrane will be filed on SEDAR within 45 days from the date of the July 21, 2017 news release.

Beaver Dam – The Beaver Dam Mineral Resource estimates are based on a National Instrument 43-101 technical report entitled "Technical Report of the Beaver Dam Gold Project, Nova Scotia " dated March 2, 2015 which has been prepared in respect of the Beaver Dam Gold Project by FSS International Consultants (Aust) Pty. Ltd. (“FSSI”) of Beecroft, NSW, Australia. The report is available for review on the Company’s website and on SEDAR (www.sedar.com).

Fifteen Mile Stream - The Fifteen Mile Stream Mineral Resource estimates presented herein are based on news release dated July 21, 2017, and was prepared in accordance with National Instrument 43-101. The news release is available for review on the Company’s website and on SEDAR (www.sedar.com).. Technical Reports, prepared in accordance with NI 43-101, on the resource estimate at Fifteen Mile Stream and Cochrane will be filed on SEDAR within 45 days from the date of the July 21, 2017 news release.

Economic Impact Study

In February 2015, the Company announced the results of an Economic Impact Study conducted in respect of the Company’s MRC Projects based on the two potential open-pit production scenarios at Touquoy and Beaver Dam, reported in the Company’s PEA.

The Company engaged KPMG to produce the Study to be used as the basis for its continuing discussions with the Federal and Provincial governments in respect of the development of the Moose River Consolidated Gold Projects. The Study focuses on job creation, fiscal revenues, and overall economic wealth for the province as well as Canada. The tables below provide a summary of the economic impact on the province as well as federally under the Base Case and Base plus Cochrane Case, respectively:

Summary of Economic Impact (direct and indirect) on Canada and Nova Scotia – Base Case*

Economic Benefits to Canada Economic Benefits to Nova Scotia

Construction Phase (Cumulative - 2 years

before commencement of production)

Production Phase

(Per year)



Production Phase

(Per year)

Value-added 1

(millions $) 93.0 26.5 69.3 19.7

Jobs created (person-year equivalent)

1,005 278 781 228

Government revenues 2 (millions $)

5.5 8.1 4.1 10.2

*Base case assumes initial production from Touquoy and Beaver Dam




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Summary of Economic Impact (direct and indirect) on Canada and Nova Scotia – Base plus

Cochrane Case**

Economic Benefits to Canada Economic Benefits to Nova Scotia



Production Phase

(Per year)



Production Phase

(Per year)

Value-added1 (millions $)

162.3 43.6 120.1 31.5

Jobs created (person-year equivalent)

1,749 455 1,352 367

Government revenues 2

(millions $) 9.7 13.1 7.1 17.0

**Base case plus Cochrane Case assumes Base Case (defined above) plus Cochrane Hill Project.

1 – Value added refers to the economic definition of wealth created by a project (or its impact in terms of Gross domestic production). It is presented on an undiscounted basis but in 2014 constant dollars. Some of the major contributors to the Value added figures include, (a) salaries and benefits paid to employees by either Atlantic or its suppliers; (b) net revenues to individual businesses and c) the return on capital of businesses 2 – Government Revenues in Canada and Nova Scotia comprise corporate taxes (paid by Atlantic only), personal income taxes, provincial mining taxes (Nova Scotia only), as well as taxes on products. The total impact on the Canadian economy as a whole compared to the province of Nova Scotia are approximately 30% to 35% higher under the Base case scenario, and 30% to 40% higher under the Base plus Cochrane case, as some of Atlantic’s suppliers would likely be based in other Canadian provinces. OTHER PROPERTIES IN NOVA SCOTIA

Cochrane Hill Project


The Cochrane Hill Gold Project is a 100% owned earlier stage development project. It is located approximately 80 km east of the central milling facility at Touquoy and about 35 kilometres south of the town of Antigonish. It is accessible via Highway #7 which passes within 300 metres of the old Cochrane Hill mine site.

The Cochrane Hill Property is secured under a single exploration license (EL51477) comprising 76 claims. The Cochrane Hill deposit is located entirely within ungranted Crown lands.

A private 3% NSR is payable on production from Cochrane Hill, of which two-thirds can be repurchased by Atlantic Gold for $1.5 million. The Company expects to exercise this buy-back option on Cochrane Hill. In addition to the private NSR, Cochrane Hill is subject to a 1% royalty payable to the government of Nova Scotia.

On September 29, 2014, the Company released the results of a Preliminary Economic Assessment (“PEA”) which included the Company’s Cochrane Hill Project. The technical report can be located on the Company’s website www.atlanticgoldcorporation.com and on SEDAR, www.sedar.com.

http://www.atlanticgoldcorporation.com/


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Fifteen Mile Stream


Fifteen Mile Stream is a 100% owned property located in eastern Halifax County, Nova Scotia, approximately 95 km northeast of Halifax and approximately 57 km northeast of the central milling facility at Touquoy and is readily accessible by highway. It comprises the historic Fifteen Mile Stream gold district. Access to the area is provided by highway #374 which transects the province from Sheet Harbour in the south to Stellarton in the north. The Fifteen Mile Stream Property is secured under two exploration licenses (ELs 10406 and 05889) comprising 31 claims, as well as a special license (SL 11/90) comprising eight claims. All licenses cover a total of 701 hectares. The claims are currently held by 6179053 Inc. and Atlantic Mining NS Corp. (“Atlantic Mining”), both of which are wholly owned subsidiaries of the Company.

New M&I Resource estimates for Cochrane Hill and Fifteen Mile Stream

On July 21, 2017, the Company announced the results of its resource definition program at Cochrane Hill

and Fifteen Mile Stream providing an updated Mineral Resource Estimate for both deposits. The

previously announced resource definition drilling programs on 25m x 20m centres were completed in

June with the objective of upgrading Mineral Resources to Measured and Indicated categories at both

properties. The new resource estimates result in 398,000 oz. Au of Measured and Indicated resources at

Cochrane Hill and the definition of 452,000 oz. Au of Measured and Indicated resources at Fifteen Mile

Stream.

FIFTEEN MILE STREAM

Fifteen Mile Stream lies along the same geological trend as the Company’s other related deposits – Touquoy, Beaver Dam and Cochrane Hill – and all are hosted within the same critical stratigraphy and structure, over a strike length of 80 km. Fifteen Mile Stream’s 2015 Inferred Mineral Resources were estimated at 11.72 million tonnes at 1.55 g/t Au for 584,000 contained ounces (Source: NI 43-101 Technical Report entitled “Technical Report of the Fifteen Mile Stream Gold Project, Halifax County, Nova Scotia” dated February 18, 2015). All assay results from the recent definition drilling program have been incorporated in the project drill-hole database. The drill database underpinning the current resource estimate in relation to Fifteen Mile Stream comprises 335 diamond drill holes from which a dataset of 17,310 two-metre composites have been created.

The composite dataset incorporates drilling from the Egerton-MacLean, Hudson and Plenty Zones, which are located at the eastern and western ends of an anticlinal dome and approximately 300m south of the dome respectively. At Egerton-MacLean and Hudson, mineralization is localized within a north-dipping sequence of sediments around and within the hinge zone of the anticline with mudstones bearing thin layer-parallel quartz veins being the preferred host. At Plenty, mineralization is localized in similar host rocks in what is interpreted to be an up-faulted limb of the same anticline. Gold was discovered at Fifteen Mile Stream in 1867 with production of about 19,400oz documented during 1883-1911. During 1985-88 Pan East Resources drilled 134 diamond drillholes (26,612m) with a further 29 holes (3,741m) drilled in 2011 by Acadian Mining Corporation, now a wholly-owned subsidiary of Atlantic.

These resource estimates for Fifteen Mile Stream have an effective date of July 20, 2017 and were prepared by Mr. Neil Schofield, a principal of FSSI Consultants (Australia) Pty Ltd. The tables below provide the current resource estimate prepared in accordance with NI 43-101 for a range of cut-off grades. The cut-off grades for the Mineral Resources below are based on Touquoy operating costs where the Company has been actively pre-production mining since July 2016. Other technical parameters and cost assumptions are listed in the Technical Disclosure section of this release. At a selected cut-off

15

grade of 0.35 g/t Au the optimized pit shell for Fifteen Mile Stream contains Measured and Indicated Resources of 10.58 Mt at an average grade of 1.33 g/t Au and 6.64 Mt of material at 1.12 g/t Au in the Inferred category with a 2.2:1 strip ratio.

Cut-off

grade (g/t) Tonnes

Grade (g/t)

Au

Contained

Au (oz)

Cut-off

grade (g/t) Tonnes

Grade (g/t)

Au

Contained

Au (oz)

0.3 2,924,000 1.25 118,000 0.3 8,458,000 1.26 342,000

0.35 2,709,000 1.33 116,000 0.35 7,876,000 1.33 336,000

0.4 2,519,000 1.40 113,000 0.4 7,320,000 1.40 329,000

0.5 2,143,000 1.56 108,000 0.5 6,331,000 1.55 315,000

FIFTEEN MILE STREAM - MEASURED

RESOURCE ESTIMATE

FIFTEEN MILE STREAM - INDICATED RESOURCE

ESTIMATE

Cut-off grade

(g/t) Tonnes Grade (g/t) Au

Contained Au

(oz)

0.3 11,382,000 1.26 460,000

0.35 10,585,000 1.33 452,000

0.4 9,839,000 1.40 442,000

0.5 8,474,000 1.55 423,000

FIFTEEN MILE STREAM - MEASURED & INDICATED RESOURCE

ESTIMATE

Cut-off

grade (g/t) Tonnes

Grade (g/t)

Au

Contained

Au (oz)

0.3 7,218,000 1.06 246,000

0.35 6,637,000 1.12 240,000

0.4 6,112,000 1.19 233,000

0.5 5,198,000 1.32 220,000

FIFTEEN MILE STREAM - INFERRED RESOURCE

ESTIMATE

*Resources that are not reserves do not have demonstrated economic viability* Based on review and modelling of the drill data, further drilling will be undertaken over the next 12 months to the north east of the Egerton Maclean zone, at the Plenty zone, in the trend between the Egerton Maclean zone and Plenty, and to the west of the Hudson zone where there is believed to be potential for additional mineralization. COCHRANE HILL

Previously published Mineral Resources at Cochrane Hill currently comprise Indicated Resources of 4.5 million tonnes at 1.8g/t Au for 251,000 oz. and Inferred Resources of 5.6 million tonnes at 1.6 g/t Au for 298,000 oz. (Source: NI 43-101 Technical Report entitled “NI 43-101 Technical Report, Preliminary Economic Assessment, Nova Scotia, Canada” dated October 14, 2014).

All assay results from the recent definition drilling program have been incorporated in the project drill-hole database. The drill database underpinning the current resource estimate for Cochrane Hill comprises 216 diamond drill holes from which a dataset of 11,329 two-metre composites have been created. The recent resource definition drilling evidences a halo of disseminated lower grade mineralization which has been incorporated into the estimate which is one of the drivers of the lower average grade of the resource in the measured and indicated category.

16

The composite dataset incorporates drilling along an 800m segment of the Cochrane Hill Anticline, a north-east trending tight to isoclinal fold which, in the vicinity of the Cochrane Hill deposit, is overturned with both limbs dipping to the north at 70°. Gold mineralization occurs within the southern limb of the anticline in a sequence of interbedded biotite schists representing well-bedded, though metamorphosed, argillites and greywackes. The mineralized zone is recognizable as a fairly discrete, tabular zone of about 2% disseminated sulphides (pyrrhotite and arsenopyrite) having a true width of 15-25m. Gold was discovered at Cochrane Hill in the 1860’s with production of about 1,353 oz. between 1868 and 1929. Ore was won by underground mining from three shafts. During 1974-1989 a total of 96 holes for 13,946m was drilled by Massval Mines Ltd (1973-74), Northumberland Mines Ltd (1979-81) and Scominex (1984-87) and, in addition, underground development and exploration was undertaken by Scominex (1986-87) and Novagold Resources Inc (1988), with 56 underground holes for 2,873m drilled.

These resource estimates for Cochrane Hill have an effective date of July 20, 2017 and were prepared by Mr. Neil Schofield, a principal of FSSI Consultants (Australia) Pty Ltd. The tables below illustrate the current resource estimate prepared in accordance with NI 43-101. The Mineral Resources below are also based on Touquoy operating costs where the Company has been actively pre-production mining since July 2016. At a selected cut-off grade of 0.35 g/t Au the optimized pit shell for Cochrane Hill contains Measured and Indicated Resources of 10.66 Mt at an average grade of 1.16 g/t Au and 1.63 Mt of Inferred material at 1.32 g/t Au with a 3.1:1 strip ratio.

Cut-off

grade (g/t) Tonnes

Grade (g/t)

Au

Contained

Au (oz)

Cut-off

grade (g/t) Tonnes

Grade (g/t)

Au

Contained

Au (oz)

0.3 6,486,000 1.18 245,000 0.3 4,788,000 1.03 159,000

0.35 6,170,000 1.22 242,000 0.35 4,489,000 1.08 156,000

0.4 5,855,000 1.26 238,000 0.4 4,181,000 1.13 152,000

0.5 5,197,000 1.37 229,000 0.5 3,598,000 1.25 144,000

COCHRANE HILL - MEASURED RESOURCE

ESTIMATE

COCHRANE HILL - INDICATED RESOURCE

ESTIMATE

Cut-off grade

(g/t) Tonnes

Grade (g/t)

Au

Contained

Au (oz)

0.3 11,274,000 1.12 404,000

0.35 10,659,000 1.16 398,000

0.4 10,036,000 1.21 390,000

0.5 8,795,000 1.32 373,000

COCHRANE HILL - MEASURED & INDICATED

RESOURCE ESTIMATE

Cut-off

grade (g/t) Tonnes

Grade (g/t)

Au

Contained

Au (oz)

0.3 1,746,000 1.25 70,000

0.35 1,627,000 1.32 69,000

0.4 1,521,000 1.39 68,000

0.5 1,292,000 1.55 64,000

COCHRANE HILL - INFERRED RESOURCE

ESTIMATE

*Resources that are not reserves do not have demonstrated economic viability*

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Based on further review and modelling of the new drill data, further drilling will be undertaken over the next 12 months at depth to extend the pit design and also to the east where there appears to be potential for extensions to the known mineralization.

Technical Disclosure

The tables above contain the combined Mineral Resource estimates for the Egerton-MacLean, Hudson and Plenty Zones at Fifteen Mile Stream and the Cochrane Hill Gold Deposit as of July 20, 2017. These are current resource estimates that are in accordance with the current Canadian Institute of Mining, Metallurgy and Petroleum Resources (CIM) Definition Standards on Mineral Resources and Mineral Reserves as required by NI 43-101 - Standards of Disclosure for Mineral Projects.

The news release outlining the Cochrane Hill and Fifteen Mile stream mineral resource estimate update is available for review on the Company’s website and on SEDAR (www.sedar.com). Technical Reports, prepared in accordance with NI 43-101, on the resource estimate at Fifteen Mile Stream and Cochrane will be filed on SEDAR within 45 days from the date of the July 21, 2017 news release.

Metallurgical testwork for Cochrane Hill is ongoing but no detailed metallurgical investigations have been completed yet for the gold mineralization at Fifteen Mile Stream. The often visible gold is expected to be free milling, as it is at the Company's Touquoy, and Beaver Dam deposits.

Other Exploration Properties

The Company’s regional land package in Nova Scotia presently comprises approximately 210 km2 of

claims located throughout the Meguma Terrane specifically selected, or retained to explore for potential

disseminated gold mineralization, similar to the Company’s Touquoy and Beaver Dam properties. The

exploration claims of prime interest are those which secure the 80km of key ground along the Touquoy–

Beaver Dam–Fifteen Mile Stream–Cochrane Hill trend. The Company also holds existing royalty interests

on the Goldenville (1% NSR), Dufferin (2% NSR) and Tangier (1% NSR) properties located in Nova

Scotia. None of these properties are currently in production and no royalty income is currently being

generated.

The technical information contained in this MD&A was reviewed by Wally Bucknell, Bsc (Hons), FAusIMM,

a Qualified Person as defined by NI 43-101.

OVERALL PERFORMANCE AND RESULTS OF OPERATIONS

Three months ended June 30, 2017

The Company incurred a net loss of $992,626 during the three months ended June 30, 2017 (2016:

$930,763). The most significant operating expenses incurred were management fees, salaries and

benefits of $390,828 (2016: $223,112) share-based payments of $505,498 (2016: $160,681), corporate

development and investor relations of $151,387 (2016: $72,461), and professional fees of $239,652

(2016: $109,936). The increase in management fees, salaries and benefits is a result of the growth of the

Company largely stemming from increased activity, specifically, the construction and development

activities at MRC and other Nova Scotia deposits. Share-based payments represents the Black-Scholes

calculated fair value of stock options issued to directors, officers, consultants and employees which

vested during the period. The increase in share-based payments is due to an increased number of

options vesting during the period resulting from the stock option grants that occurred during Q1 and Q2

2017. Corporate development and investor relations increased from the same period in the prior year due

to increased marketing and investor relations activity around the construction of the Company’s MRC


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Project and updated resource estimates at Cochrane Hill and Fifteen Mile Stream. The increase in

professional fees from the same period in the prior year largely as a result of legal fees incurred around

the administration of the Company’s credit facilities.

During the three months ended June 30, 2017, the Company incurred $240,368 of finance costs in

respect of standby fees charged on the undrawn balance of the Project Loan Facility and Equipment

Facility (2016: 263,542). Additionally, the Company recognized interest income of $73,256 (2016: $7,067).

The increase in interest income is a result of higher interest earning cash balances as compared to the

same period in the prior year. Further, the Company recorded a deferred tax recovery of $719,854 (2016:

$97,646) during the period to reflect the fulfillment of a portion of the Company’s flow-through liability due

to eligible expenditures being incurred during the period.

Six months ended June 30, 2017

The Company incurred a net loss of $2,455,029 during the six months ended June 30, 2017 (2016:

$1,658,988). The most significant operating expenses incurred were management fees, salaries and

benefits of $794,438 (2016: $479,027) share-based payments of $1,287,082 (2016: $416,220), corporate

development and investor relations of $300,326 (2016: $114,921), and professional fees of $328,390

(2016: $136,038). The increase in management fees, salaries and benefits is a result of the growth of the

Company largely stemming from increased activity, specifically, the construction and development

activities at MRC and other Nova Scotia deposits. Share-based payments represents the Black-Scholes

calculated fair value of stock options issued to directors, officers, consultants and employees which

vested during the period. The increase in share-based payments is due to an increased number of

options vesting during the period resulting from the stock option grants that occurred during Q1 and Q2

2017. Corporate development and investor relations increased from the same period in the prior year due

to increased marketing and investor relations activity around the construction of the Company’s MRC

Project and updated resources estimates at Cochrane Hill and Fifteen Mile Stream. The increase in

professional fees from the same period in the prior year largely as a result of legal fees incurred around

the administration of the Company’s credit facilities.

During the six months ended June 30, 2017, the Company incurred $492,830 of finance costs in respect

of standby fees charged on the undrawn balance of the Project Loan Facility and Equipment Facility

(2016: $263,542). Additionally, the Company recognized interest income of $135,297 (2016: $22,169).

The increase in interest income is a result of higher interest earning cash balances as compared to the

same period in the prior year. As discussed below in Liquidity and Capital Resources, the Company must

maintain a minimum of $6 million in a designated account for the duration of the PLF. Such account was

not held in the same period in the prior year. Further, the Company recorded a deferred tax recovery of

$1,122,217 (2016: $97,646) during the period to reflect the fulfillment of a portion of the Company’s flow-

through liability due to eligible expenditures being incurred during the period.

Financial Position

Total assets increased to $202,624,253 at June 30, 2017 from $145,689,217 at December 31, 2016. The

most significant assets at June 30, 2017 were property, plant and equipment of $152,980,841 (December

31, 2016 - $95,805,269), mineral properties of $24,949,917 (December 31, 2016 – $17,749,731), cash

and cash equivalents of $11,502,113 (December 31, 2016 - $14,396,987), and restricted cash of

$9,050,021 (December 31, 2016 - $9,337,346). The Company’s net working capital deficit at June 30,

2017 was $10,257,795.

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The net increase in property, plant, and equipment of $57,175,572 was a result of $50,906,755 of

additions to mine property - construction and development for the expenditures incurred on the MRC

Project, with a majority of the additions relating to engineering, procurement and construction costs, and

owners’ costs including earthworks, tailings management facility construction, and development of site

infrastructure. The following expenditures were incurred in respect of the MRC Project capitalized to mine

property - construction and development during the period (excluding amortization of equipment and

capital leases that were capitalized):

Six month period ended June 30, 2017

Engineering, procurement and construction 42,125,701

Salaries & Consulting Fees 3,519,365

Environmental 278,235

Permitting & claims 128,009

Office and Admin. 221,012

Travel & Accomodation 139,496

Equipment & Supplies 4,233,073

Project Insurance 261,864

Expenditures for the period 50,906,755

Additionally, the Company recognized an increase of $1,647,111 to its reclamation provision which has

been capitalized to mine property – construction and development.

Lastly, accretion of $290,966 in respect of the Convertible Debenture, $2,031,644 interest charged on the

Company’s PLF, and finance charges of $308,877 and $601,158 on the Company’s Capital Lease Facility

and PLF, respectively, have been capitalized as borrowing costs to mine property – construction and

development.

Mineral properties increased by $7,200,186, primarily as a result of the drilling, assaying and related costs

incurred on the Company’s resource definition program at Fifteen Mile Stream and Cochrane Hill Project.

The decrease in cash and cash equivalents during the period of $2,894,874 resulted from $3,072,061

cash outflow used in operating activities, $61,449,067 cash outflow from investing activities of the

Company, partially offset by $61,626,254 cash inflow from financing activities. Cash inflow from financing

activities was in respect of $63,401,000 proceeds from drawdowns on the Company’s PLF, $1,640,727

cash inflow from stock option and warrant exercises during the period, partially offset by $1,942,064 in

interest payments made on the PLF, $552,500 interest payments made on the convertible debentures,

and $865,235 in net lease payments made on the Company’s Equipment Facility.

Cash outflows from investing activities included $55,993,812 spent on the MRC Project expenditures largely in respect of engineering, procurement and construction costs, and owners’ costs including earthworks, tailings management facility construction, and development of site infrastructure, and $5,909,067 in mineral property expenditures, of which a majority of the cost paid was in respect to the continued exploration work at the Company’s Cochrane Hill and Fifteen Mile Stream deposits. This was partially offset by $110,813 of interest income received on the Company’s cash and cash equivalents, and a $342,999 cash inflow from restricted cash in respect of the Company’s collateral on the Surety Bond as the Company switched surety providers during the period, requiring a lower rate of collateral required to be held.

20

Summary of Quarterly Results

Q2 Q1 Q4 Q3

2017 2017 2016 2016

Total Revenue (Note 1) N/A N/A N/A N/A

Net loss for the period (992,626)$ (1,462,403)$ (1,678,439)$ (1,554,027)$

Loss per share - basic and diluted (0.01)$ (0.01)$ (0.01)$ (0.01)$

Q2 Q1 Q4 Q3

2016 2016 2015 2015

Total Revenue (Note 1) N/A N/A N/A N/A

Net loss for the period (930,763)$ (728,224)$ (946,534)$ (649,305)$

Loss per share - basic and diluted (0.01)$ (0.01)$ (0.01)$ (0.01)$

Note 1 – As the Company has yet to secure a mineral related asset in production, the Company has no revenue to report during the financial reporting periods noted above.

The net loss in Q4 2015 compared to Q3 2015 increased as a result of increased professional fees resulting from the Company’s efforts in obtaining project financing, which was subsequently secured in Q1 2016. The net loss in Q1 2016 compared to Q4 2015 decreased as a result of these same professional fees expensed during Q4 2015. The net loss in Q2 2016 compared to Q1 2016 increased as a result of standby fees charged on the Company’s undrawn balance of its PLF. This was partially offset by the deferred tax recovery that was recognized on the issuance of the Convertible Debenture. The net loss in Q3 2016 compared to Q2 2016 increased as a result of increased share based payments due to a higher number of stock options vesting during the quarter from two stock option grants, an increase in management fees, salaries and benefits as a result of the growth of the Company stemming from the development of the Company’s MRC Project during the period, in addition to further accrued standby fees charged on the Company’s undrawn balance of its PLF. The net loss in Q4 2016 compared to Q3 2016 increased as a result of increased management fees, salaries and benefits due to annual performance bonus payments accrued in Q4, partially offset by $324 thousand deferred tax recovery that was recognized on the fulfillment of a portion of the Company’s flow-through liability from eligible expenditures incurred during the period. The net loss in Q1 2017 compared to Q4 2016 decreased as a result of lower management fees, salaries and benefits due to the annual performance bonus payments that were accrued in the prior quarter, this was partially offset by an increase in share based payments in respect of stock option grants that were made during the quarter to directors, officers and employees of the Company. The net loss in Q2 2017 compared to Q1 2017 decreased due to lower share based payment expenses recognized as a result of a higher number of stock options being granted in the prior period. As the Company accounts for stock options under graded vesting, this results in a higher value of share based payments expensed being recognized at the earlier of the stock option life.

21

L I Q U I D I T Y and C A P I T A L R E S O U R C E S

As at June 30, 2017, the Company had a balance of $11,502,113 in cash deposits and short-term GICs

with major Canadian financial institutions (December 31, 2016 - $14,396,987). The Company also holds

a restricted cash balance of $9,050,021 which includes the $6,000,000 minimum proceeds account held

as working capital contingency, as required under the terms of the PLF. As at June 30, 2017, the

Company had $17,599,000 remaining to be drawn on the PLF.

The Company’s working capital deficit position as at June 30, 2017 was $10,257,795. However, the

Company believes that it has sufficient funding to meet its obligations and to maintain administrative and

operational expenditures for the next 12 months from existing treasury, remaining drawdown amounts on

the PLF, as well as estimated future operating cash flows. Of the current liabilities balance of $25.5

million, approximately $12.3 million is not due until February 2018 – June 2018, at which point the

Company anticipates that it will be well into commercial production.

The Company has received the following sources of funding:

Project Loan Facility To provide funding for the development of the Company’s MRC Project, on May 6, 2016, the Company, through Atlantic Mining, executed a syndicated project facility agreement (the “Credit Agreement”) in respect of a $115 million Project Loan Facility (“PLF”) to fund construction costs of the Company’s MRC Project.

The PLF carries an interest rate of the Canadian Dealer Offered Rate (“CDOR”) plus a 5% margin (pre-Project Completion), reducing to a margin of 4.5% post-Project Completion, and is repayable in quarterly installments over three years’ post commencement of construction. Project Completion is when physical construction of all project facilities has been completed in accordance with the terms of the PLF, and the Company has achieved continuous production at Touquoy whereby the plant throughput reaches an average of 5,400 tonnes per day for 10 consecutive days.

As at June 30, 2017, the total drawdown on the PLF was $97.4 million (December 31, 2016: $34 million).

The availability of the remainder of the PLF for drawdown is subject to the satisfaction of a number of

routine and administrative conditions precedent for facilities of this nature. The PLF is also secured

through guarantees and a first ranking charge on all assets of the Company and each of its material

subsidiaries. There is also a standby fee of 1.5% per annum, payable quarterly in arrears, on the daily

undrawn principal amount of the PLF during the availability period The Company’s PLF contains certain project covenants including a minimum working capital ratio, calculated quarterly. As a result of discussions in early 2017 with the PLF lenders, the requirement for compliance with a working capital ratio during construction was agreed as not necessary, and on April 25, 2017, it was agreed that any breach of this covenant was technical in nature and is waived for all of the year 2017. As at June 30, 2017, the Company had incurred $4,648,383 (December 31, 2016 – $4,648,383) in transaction costs which consisted primarily of legal and advisory fees, and other financing expenses with respect to the PLF described above. Transaction costs have been recorded proportionately against the amount drawn on the PLF, and will be amortized over the repayment period of each respective drawdown using the effective interest rate method. For the three month and six month periods ended June 30, 2017, standby fees of $119,115 and $348,092, respectively, were recorded in the Company’s interim consolidated statement of loss and comprehensive loss (2016 – nil). The Company recognized interest of $1,222,723 and $2,031,644 for the three and six months ended June 30, 2017 (2016 – nil) and amortization of deferred finance charges of

22

$383,062 and $601,158 for the three and six months ended June 30, 2017, were both capitalized to property, plant and equipment (2016 – nil).

The Company may prepay all or part of the principal balance outstanding at any time without penalty. As at June 30, 2017, the Company is committed to interest payments and minimum future principal payments for the PLF, assuming that the remaining $17.6 million is drawn, as follows:

2017 2,890,000

2018 33,388,000

2019 57,062,000

2020 33,822,000

127,162,000$

Stock option and warrant exercises During the six-month period ended June 30, 2017, the exercise of stock option awards and warrants provided the Company with additional liquidity. A total of 1,525,000 stock options were exercised for total proceeds of $633,485. A total of 1,678,736 warrants were exercised for total proceeds of $1,007,242.

Brokered/Non-brokered private placements

On May 16, 2016, the Company completed a bought deal private placement financing for gross proceeds

of $14,375,046 (the “Brokered Offering”) through the issuance of 23,958,410 common shares of the

Company at a price of $0.60 per share (the “Offering Price”), as well as the completion of a non-brokered

private placement financing for gross proceeds of $13,543,997 (the “Non-Brokered Offering”), through the

issuance of 22,573,329 common shares of the Company at the Offering Price.

On September 22, 2016, the Company completed a bought deal private placement financing for gross

proceeds of $5,747,700 through the issuance of 5,474,000 flow-through common shares of the Company

at a price of $1.05 per share. The Company also completed a non-brokered private placement financing

for gross proceeds of $3,449,828 through the issuance of 3,285,550 flow-through common shares of the

Company. The proceeds from the September 2016 private placements will be used in conjunction with

the Company’s resource definition drilling program on the Company’s Cochrane Hill and Fifteen Mile

Stream deposits and regional drilling program on other exploration prospects within Nova Scotia.

Convertible Debentures

On May 10, 2016, the Company completed a non-brokered financing of $13 million by way of issuance of

convertible debentures. The Convertible Debentures carry an interest rate of 8.5%, with the principal

payment due on the later of (a) May 10, 2021 and (b) the date that is the earlier of (i) six months after the

final maturity date of the Company’s $115 million PLF and (ii) May 30, 2022. The principal amount of the

convertible debentures are convertible into common shares of the Company at a conversion price of

$0.60 per share, representing a 20% premium to the closing trading price of the common shares of the

Company, prior to the date the financing was originally announced. Accrued interest will also be

convertible into common shares of the Company but at the market price of the shares at the time of

conversion. Equipment Facility On May 26, 2016, the Company executed a definitive Master Lease Agreement in respect of a $20 million mining fleet equipment lease facility to fund the Company’s acquisition of mining equipment for the Company’s MRC Project. The term of the Equipment Facility is 5 years from delivery, and is secured by the mining fleet. As at June 30, 2017, the Company has entered into a total of 20 equipment lease contracts forming part of the $20 million Equipment Facility, and as a result the Company recognized a $10,240,459 finance lease obligation, determined as the net present value of the minimum lease

23

payments owing on the executed lease contracts, with a corresponding amount recognized as a non-cash addition to equipment within PP&E. Lease payments under the Equipment Facility are payable on a quarterly basis and comprise principal payments and interest, interest being CDOR plus 5.35%. The lease payment schedule is thus amended for each ninety-day period to reflect increases or decreases to CDOR. Restricted cash The Company holds a restricted cash balance of $9,050,021 which includes $6,000,000 held in respect of requirements under the Company’s PLF, whereby the Company is required to maintain a minimum of $6,000,000 in a designated bank account until the PLF is repaid.

A balance of $2,401,000 represents 70% of a $3,430,000 reclamation performance bond that was issued by way of a surety bond in May 2017 (the “Surety Bond”), through the Company’s wholly owned subsidiary Atlantic Mining NS Corp. (“Atlantic Mining”), and a surety provider (December 31, 2016: $2,744,000). The $3,430,000 is the first installment of a $10,400,000 phased reclamation security in respect of the MRC Project. The phased approach ensures that adequate security is in place before each phase of disturbance, construction and operation at the MRC Project. The total $10,400,000 financial security is to be posted in full by December 31, 2019. The surety provider secured the Surety Bond by a line of credit with the Bank of Montreal (“BMO”) at 70% of the value of the required level of the reclamation performance bond ($2,401,000). As part of the line of credit, BMO required that 100% of the line of credit be collateralized by way of a restricted guaranteed investment certificate (“GIC”). The restricted GIC has a maturity date of May 24, 2018, and earns interest at 0.6% per annum. The May 2017 Surety Bond replaced a previously issued surety bond that was initially issued in May 2016 through an alternate surety provider, which required 80% of the $3,430,000 reclamation performance bond to be secured.

The remaining $649,021 balance is cash held in respect of the Company’s Debt Service Reserve Account

(“DSRA”) under its Equipment Facility, whereby the Company is required to maintain an amount equal to

100% of one quarterly payment in respect of all leases under the Equipment Facility (December 31, 2016:

$593,346). The DSRA account is to be maintained up to and including the date which is three months

after the development of the Touquoy deposit is complete.

Commitments

The Company renewed its Vancouver office lease agreement expiring September 30, 2020 and shares

office space and related costs with a related company. As part of the office sharing agreement, 15% of

the Vancouver office lease rental payment are recoverable from the related company. One of the

Company’s subsidiaries has an office lease commitment in Nova Scotia. A summary of the Company’s

commitments in respect of the above-mentioned leases is set out below:

2017 189,524

2018 246,993

2019 226,283

2020 113,142

775,942$

Crown Lease Agreement In 2016, the Company finalized a lease agreement in respect of seven parcels of Crown land required within the footprint of Touquoy. Lease payments are $68,300 per annum, continuing until the termination of the lease in February 2026.

24

Phased Reclamation Bond As discussed above in Restricted Cash, the Company is required to post a phased reclamation security in the amount of $10.4 million by December 31, 2019. The various future milestone payments for the reclamation security are as follows:

2017 2,100,000

2018 2,600,000

2019 2,100,000

6,800,000$ Subsequent to June 30, 2017, the Company posted the third installment of its phased reclamation bond in the amount of $2,100,000.

EPC Agreement On May 9, 2016, the Company signed a fixed price Engineering, Procurement and Construction (“EPC”) contract to build a 2 million tonne per annum process plant, truck shop and office facilities, as well as other support infrastructure related to these facilities, for the Company’s MRC Project. At June 30, 2017, the Company had incurred $80.3 million in respect of the EPC contract. Equipment Facility As disclosed above, as at June 30, 2017, the Company had entered into a total of 20 leases under the Equipment Facility. The Company is required to make quarterly lease payments in respect of each finance lease. The undiscounted future minimum lease payment requirements are as follows:

Up to 1 year 1-5 years Total

Minimum lease payments 2,714,046 8,953,982 11,668,028

Finance charges (583,553) (844,016) (1,427,569)

Total 2,130,493 8,109,966 10,240,459

Exploration Tenement Commitments In order to maintain current rights of tenure to exploration tenements, the Company is required to incur expenditures of approximately $175,000 in respect of claim renewal fees and minimum work requirements in 2017/2018.

OFF - BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

SUBSEQUENT EVENTS

• Subsequent to June 30, 2017, the Company made its 10th drawdown on the PLF in the amount of $9,500,000.

• Subsequent to June 30, 2017, 1,026,200 stock options and a cumulative total of 68,177 warrants were exercised at weighted average exercise price of $0.45 per share and $0.60 per share, respectively.

• Subsequent to June 30, 2017, the Company granted 150,000 stock options to employees of the Company at a weighted average exercise price of $1.55

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O T H E R M D & A R E Q U I R E M E N T S

Related party transactions and key management compensation

a) Key management compensation

Key management includes the Company’s directors, Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer. Compensation awarded to key management is presented in the table below:

Three months ended Three months ended Six months eneded Six months eneded

Related Party Relationship Compensation Type June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016

Steven Dean Chairman and CEO Consulting fees, benefits and

share-based payments *

$ 243,512 $ 159,423 576,829$ 357,131$

Robert Atkinson Director Directors' fees and share-

based payments

28,128 12,550 71,303 29,551

Don Siemens Director Directors' fees and share-

based payments

28,128 12,550 71,303 29,551

David Black Director Directors' fees and share-

based payments

28,128 12,550 71,303 29,551

William Armstrong Director Consulting fees, directors' fees

and share-based payments **

37,016 29,316 82,931 64,840

Ryan Beedie Director Director's fees 19,726 - 47,298 -

Wally Bucknell Director Consulting fees and share-

based payments

70,516 57,130 148,431 119,548

John Morgan Director Wages, benefits, and share-

based payments

27,359 85,748 66,074 193,994

Maryse Belanger President and COO Wages, benefits, and share-

based payments

254,827 - 567,241 -

Chris Batalha CFO and Corporate

Secretary

Wages, benefits, and share-

based payments

93,005 44,665 218,238 100,519

830,345$ 413,932$ 1,920,950$ 924,685$

* Consulting fees are paid to Sirocco Advisory Services Ltd., a company controlled by Steven Dean.

** Consulting fees are paid to Metallica Consulting Co, a company controlled by William Armstrong.

b) Amounts due to related parties

As at June 30, 2017, the Company owed $11,874 to Sirocco Advisory Services, a company controlled by Steven Dean, the CEO and Chairman of the Company (December 31, 2016: $426,710).

As at June 30, 2017, the Company owed $10,500 (December 31, 2016: $8,333) to Metallica Consulting Services, a company controlled by William Armstrong, a director of the Company.

As at June 30, 2017, the Company owed $47,467 (December 31, 2016: $13,250) to Wally Bucknell, a director of the Company.

As at June 30, 2017, the Company owed $nil (December 31, 2016: $75,168) to Chris Batalha, the CFO of the Company.

As at June 30, 2017, the Company owed $nil (December 31, 2016: $90,000) to Maryse Belanger, the COO of the Company.

Amounts due to and from related parties are unsecured, non-interest bearing and due on

demand.

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As discussed above, on May 10, 2016, the Company completed a non-brokered financing by way of issuance of convertible debentures, of which $8 million is held by Beedie Investments Ltd., a Company controlled by Ryan Beedie, a director of the Company.

c) Amounts due from related party

The Company charges office lease and administrative expenditures to Oceanic Iron Ore Corp. (“Oceanic”), a Company with officers and a director in common being Steven Dean and Chris Batalha. During the three and six-month periods ended June 30, 2016, office lease and administrative expenditures billed to Oceanic amounted to $23,881 and $44,095, respectively (2016: $19,478 and $38,650, respectively). As at June 30, 2017, the Company was owed $44,095 from Oceanic (December 31, 2016: $19,034).

Critical Accounting Estimates and Judgments

Commercial production

The determination of when a mine is in the condition necessary for it to be capable of operating in the

manner intended by management (referred to as “commercial production”) is a matter of significant

judgement. In making this determination, management will consider specific facts and circumstances.

These factors will include, but are not limited to, whether the major capital expenditures to bring the mine

to the condition necessary for it to be capable of operating in the manner intended by management have

been completed, completion of a reasonable period of commissioning, consistent operating results being

achieved at a pre-determined level of design capacity and recovery for a reasonable period for time and

the transfer of operations from construction personnel to operational personnel has been completed.

Accounting standards recently adopted

Revenue

The Company early adopted IFRS 15 effective January 1, 2017. IFRS 15, Revenue from Contracts with

Customers deals with revenue recognition and establishes principles for reporting useful information to

users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows

arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control

of a good or service and thus has the ability to direct the use and obtain the benefits from the good or

service. The standard replaces IAS 18, Revenue and IAS 11, Construction contracts and related

interpretations. Revenue generated from operations at the MRC Project will be accounted for under the

new standard. Management will assess the impact of IFRS 15 as the Company enters into sales

agreements.

Changes in accounting standards not yet effective

Financial Instruments

IFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial

assets and financial liabilities. It replaces the guidance in IAS 39, Financial Instruments: Recognition and

Measurement that relate to the classification and measurement of financial instruments. IFRS 9 retains

but simplifies the mixed measurement model and establishes three primary measurement categories for

financial assets: amortized cost, fair value through other comprehensive income and fair value through

profit or loss. The basis of classification depends on the entity’s business model for managing its financ ial

instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the

standard retains most of the IAS 39 requirements. The main change for liabilities is that, in cases where

the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own

credit risk is recorded in other comprehensive income (loss) rather than in net earnings. IFRS 9 is

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effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.

Management expects the adoption to have an impact on the carrying value of its available-for-sale

financial asset.

Leases

In January 2016, the IASB issued IFRS 16 – Leases (“IFRS 16”) which replaces IAS 17 – Leases and its

associated interpretive guidance. IFRS 16 applies a control model to the identification of leases,

distinguishing between a lease and a service contract on the basis of whether the customer controls the

asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces

significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting

model that is similar to current finance lease accounting, with limited exceptions for short-term leases or

leases of low value assets. Lessor accounting remains similar to current accounting practice. The

standard is effective for annual periods beginning on or after January 1, 2019, with early application

permitted for entities that apply IFRS 15. IFRS 16 will result in an increase in assets and liabilities as

fewer leases will be expensed as payments are made. Management expects an increase in depreciation

expenses and also an increase in cash flow from operating activities as these lease payments will be

recorded as financing outflows in the cash flow statement.

Outstanding Share Data

As at the date of this report, there were 177,632,051 common shares issued and outstanding.

As at the date of this report, there were 14,341,250 stock options outstanding.

As at the date of this report, there were 21,369,246 share purchase warrants outstanding.

As at the date of this report, there were 21,666,667 common shares issuable pursuant to the convertible debentures. (This assumes the entire $13 million principal amount of the Debentures is converted at the conversion price of $0.60 per common share. Accrued interest in relation to the Debentures is also convertible into common shares, but is convertible at the market price of the common shares at the time of conversion.)

Financial Risk Management

The board of directors has overall responsibility for the establishment and oversight of the Company’s risk

management framework. The Company’s financial instruments consist of cash and cash equivalents,

restricted cash, receivables, due from related party, deposits, available-for-sale financial asset, accounts

payable, convertible debenture liability, lease obligation, Project Loan Facility, and due to related parties.

Cash and cash equivalents, restricted cash, receivables, due from related party, and deposits are

designated as loans and receivables and are measured at amortized cost.

Accounts payable, convertible debenture liabilities, lease obligation, the Project Loan Facility, and

amounts due to related parties are classified as other financial liabilities, which are measured at

amortized cost.

All financial instruments for which fair value is recognised or disclosed are categorized within a fair value

hierarchy based on the lowest level input that is significant to the fair value measurement as whole. The

Company’s available-for-sale financial asset held is categorized as Level 3 on the fair value hierarchy as

the investment is in a privately held company of which observable market data is not available.

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Financial instruments of the Company as at June 30, 2017 and December 31, 2016 are summarized as

follows:

December 31, 2016

Carrying

amount Fair value

Carrying

amount Fair value

Financial assets

Loans and receivables

Cash and cash equivalents 11,502,113$ 11,502,113$ 14,396,987$ $ 14,396,987

Due from related parties 43,860 43,860 19,034 19,034

Receivables 243,739 243,739 253,116 253,116

Restricted cash 9,050,021 9,050,021 9,337,346 9,337,346

Other non-current asset 248,077 N/A 248,077 N/A

Financial liabilities

Accounts payable and accrued liabilities $ 8,178,190 $ 8,178,190 $13,815,348 $ 13,815,348

Due to related parties 69,840 69,840 657,294 657,294

June 30, 2017

Management has determined that there are no embedded derivatives which require bifurcation.

Financial Instrument Risk Exposure

The Company is exposed in varying degrees to a variety of financial instrument related risks. The board

approves and monitors the risk management processes.

Credit risk

Credit risk arises from the potential for non-performance by counterparties of contractual financial

obligations. The Company’s exposure to credit risk is on its cash and cash equivalents, receivables,

restricted cash and due from related parties. The Company has concentration of risk with respect to cash

being held with two large Canadian financial institutions. The Company’s credit risk is mitigated by

maintaining its financial liquid assets with highly reputable counterparties. The maximum exposure to

credit risk is equal to the carrying value of the financial assets noted above.

Liquidity risk

Liquidity risk is the risk that the Company cannot meet its obligations as they fall due. The Company’s

cash and cash equivalents are invested in business accounts and term deposits which are available on

demand. The Company manages liquidity risk by preparing and maintaining cash forecasts, which

illustrate cash spent to date and its cash needs over the short term, and over repayment dates into the

future as it pertains to the Project Loan Facility, Equipment Facility, and convertible debenture.

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The following table summarizes the Company’s contractual undiscounted cash flow requirements for

financial liabilities as at June 30, 2017 and December 31, 2016:

June 30, 2017

Less than 1 year 1 - 5 years Total

Accounts payable and accrued liabilities 8,178,190$ -$ 8,178,190$

Due to related parties 69,840 - 69,840

Convertible Debenture liability 1,105,000 3,315,000 4,420,000

Project Loan Facility 15,370,000 112,384,000 127,754,000

Lease obligation 2,714,046 8,953,982 11,668,027

December 31, 2016

Less than 1 year 1 - 5 years Total

Accounts payable and accrued liabilities 13,815,348$ -$ 13,815,348$

Due to related parties 657,294 - 657,294

Convertible Debenture liability 1,105,000 3,315,000 4,420,000

Project Loan Facility 4,707,000 124,272,000 128,979,000

Lease obligation 2,402,027 8,945,583 11,347,610

Interest Rate Risk

The Company’s interest rate risk mainly arises from the interest rate impact on its interest income derived

from Canadian Dollar cash and deposits, restricted cash, convertible debentures, the Project Loan

Facility, and the Equipment Facility. The Company invests surplus cash in fixed rate term deposits. It is

the Company’s policy to reduce interest rate risk over future cash flows through the use of instruments

with a history of returns. Advances under the PLF bear interest at an interest rate of the CDOR plus a 5%

margin (Pre-Project Completion), reducing to a margin of 4.5% post-Project Completion. Similarly, the

Equipment Facility bears interest at a rate of CDOR plus a 5.35% margin. The Company manages this

risk by monitoring fluctuations in CDOR, which are not expected to be significant. A 1% change in

interest rates would have a $177,206 impact on net loss and comprehensive loss.

Market Risk

Market risk is the risk that the fair market value of the Company’s financial instruments will significantly

fluctuate due to changes in market prices. The value of the financial instruments can be affected by

changes in interest rates, foreign exchange rates and equity and commodity prices. The Company is

exposed to market risk in its cash and cash equivalents and restricted cash balance. The Company

manages market risk by investing funds with reputable financial institutions that provide competitive rates

of return.

The Company is subject to commodity price risk from fluctuations in the market prices for gold. As

discussed above, in the prior year, the Company finalized and scheduled out its Hedge Facility covering

the sale of 215,000 ounces at a flat forward price of $1,550 per ounce.

The Company’s financial instruments are not subject to significant fluctuation due to changes in equity

prices of investments included in marketable securities or foreign exchange rates.

30

Fair Value

Fair value is based on available public market information or, when such information is not available,

estimated using present value techniques and assumptions concerning the amount and timing of future

cash flows and discount rates which factor in the appropriate credit risk.

Use of Proceeds

The Company funded the initial capital costs of the MRC Project with the PLF and Convertible Debenture. The proposed use of proceeds at the time of funding were as follows:

MRC Project Initial Capital Costs

Proposed Use

of Proceeds (in

million's)

Ausenco EPC costs - plant and infrastructure

support - fixed component

86.3$

Ausenco EPC costs - plant and infrastructure

support - non-fixed component

5.0

Owner managed initial capital costs 35.6

Initial capital costs* 126.9$

*Initial capital costs above excludes $10.4 million in reclamation bond cost, as this was financed separately.

As at the date of this report, there are no material variances to the proposed initial capital costs.

Risks and Uncertainties

The Company is focused on acquisitions or other corporate transactions in gold, base metals, or other

mineral-related assets or businesses. Due to the nature of the Company’s proposed business, the

following risk factors, among others, will apply:

Key Personnel

The Company is dependent upon the services of key executives, including the directors of the Company and a small number of highly skilled and experienced executives and personnel. Due to the relatively small size of the Company, the loss of these persons or the inability of the Company to attract and retain additional highly-skilled employees may adversely affect its business and future operations.

Share Price Volatility and Liquidity

Publicly quoted securities are subject to a relatively high degree of price volatility. It may be anticipated that the quoted market for our shares will be subject to market trends generally, notwithstanding any potential success of us in creating sales and revenues. In addition, our shareholders may be unable to sell significant quantities of shares into the public trading markets without a significant reduction in the price of their shares, if at all.

Exploration, Development and Operating Risks

The exploration for and development of mineral deposits involves significant risks which even a combination of careful evaluation, experience and knowledge may not eliminate. Few properties that are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral reserves, to develop metallurgical processes and to construct mining and processing

31

facilities at a particular site. It is impossible to ensure that the exploration or development programs planned by the Company will result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as quantity and quality of the minerals and proximity to infrastructure; mineral prices, which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted but could have a material adverse effect upon the Company’s operations.

Mining operations generally involve a high degree of risk. The operations of the Company are subject to all the hazards and risks normally encountered in the exploration, development and production of minerals, including unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and possible legal liability. Although adequate precautions to minimize risk will be taken, milling operations are subject to hazards such as equipment failure or failure of retaining dams around tailings disposal areas, which may result in environmental pollution and consequent liability.

There is no certainty that the expenditures made by the Company toward the search and evaluation of minerals will result in discoveries of mineral resources, Mineral Reserves or any other mineral occurrences.

Uncertainty of Mineral Resource and Mineral Reserve Estimates

Although the Company has carefully prepared its mineral resource and mineral reserve figures with the assistance of independent experts, such figures are estimates only and no assurance can be given that the indicated tonnages and grade will be achieved or that the indicated level of recovery will be realized. There is significant uncertainty in any mineral resource and mineral reserve estimate, and the actual deposits encountered and the economic viability of, and returns from, mining a deposit may differ materially from estimates disclosed by the Company. The estimating of mineral resources and mineral reserves is a subjective process and the accuracy of mineral resource and mineral reserve estimates is a function of the quantity and quality of available data, the accuracy of statistical computations, and the assumptions used and judgments made in interpreting engineering and geological information. Any future changes in assumptions regarding commodity prices, operating costs and exchange rates may also render certain mineral resources or mineral reserves uneconomic to mine and result in a significant reduction in the reported mineral resources or mineral reserves.

Uncertainties and Risks Relating to Feasibility Studies

Feasibility studies are used to determine the economic viability of a deposit, as are pre-feasibility studies and preliminary assessments. Feasibility studies are the most detailed and reflect a higher level of confidence in the reported capital and operating costs.

There is no certainty that the Technical Report will be realized. While the Technical Report is based on the best information available to the Company, it cannot be certain that actual costs will not significantly exceed the estimated cost. While the Company incorporates what it believes is an appropriate contingency factor in cost estimates to account for this uncertainty, there can be no assurance that the contingency factor is adequate. Many factors are involved in the determination of the economic viability of a mineral deposit, including the achievement of satisfactory mineral reserve estimates, the level of estimated metallurgical recoveries, capital and operating cost estimates and estimates of future metal prices. Resource estimates are based on the assay results of many intervals from many drill holes and the interpolation of those results between holes and may also be materially affected by metallurgical, environmental, permitting, legal title, socio-economic factors, marketing, political and other factors.

Political Stability and Government Regulation Risks

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The operations of the Company are currently conducted in Nova Scotia, Canada. As such, the operations of the Company may be exposed to various levels of political, economic and other risks and uncertainties. These risks and uncertainties include, but are not limited to: changing political conditions, and governmental regulations. Changes, if any, in mining or investment policies or shifts in political attitudes in Nova Scotia or Canada more broadly may adversely affect the operations or profitability of the Company. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on the operations or profitability of the Company.

Insurance and Uninsured Risks

The business of the Company is subject to a number of risks and hazards in general, including adverse environmental conditions, industrial accidents, labor disputes, unusual or unexpected geological conditions, ground or slope failures, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or facilities and equipment, personal injury or death, environmental damage to properties of the Company or others, delays in mining, monetary losses and possible legal liability.

Although the Company may maintain insurance to protect against certain risks in such amounts as it considers being reasonable, its insurance may not cover all the potential risks associated with a mining company’s operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to the Company or to other companies in the mining industry on acceptable terms. The Company might also become subject to liability for pollution or other hazards which it may not be insured against or which the Company may elect not to insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs that could have a material adverse effect upon its financial performance and results of operations.

Environmental Risks and Hazards

All phases of the Company’s operations are subject to environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner that will require stricter standards and enforcement and involve increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the Company’s operations. Environmental hazards may exist on properties in which the Company holds interests which are unknown to the Company at present and which have been caused by previous or existing owners or operators of the properties.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

33

Amendments to current laws, regulations and permits governing operations and activities of mining and exploration companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in exploration expenses, capital expenditures or require abandonment or delays in development of new mining properties.

Fluctuations in Metal Prices

The price of the common shares, and the financial results and exploration, development and mining activities of the Company, may in the future be significantly and adversely affected by declines in the prices of gold and other metals or minerals. The prices of gold and other metals or minerals fluctuate widely and are affected by numerous factors beyond the control of the Company such as the sale or purchase of commodities by various central banks and financial institutions, interest rates, exchange rates, inflation or deflation, fluctuations in the value of the United States dollar and other foreign currencies, global and regional supply and demand, the political and economic conditions and production costs of major mineral-producing countries throughout the world, the cost of substitutes, inventory levels and carrying charges. Future serious price declines in the market prices of gold or other metals or minerals could cause continued development of and commercial production from the properties in which the Company holds an interest to be impracticable. Depending on the prices of gold and other metals and minerals, cash flow from mining operations could not be sufficient and the Company may lose its interest in, or may be forced to sell, some of its properties. Future production from the Company’s properties is dependent upon the prices of gold and other metals and minerals being adequate to make these properties economically viable.

In addition to adversely affecting the resource estimates of the Company and its financial condition, declining commodity prices can affect operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or be required under financing arrangements related to a particular project. Even if a project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or interrupt operations until the reassessment can be completed.

Commodities

The Company’s operations are or will in the future be dependent on various commodities (such as diesel fuel, electricity, steel, concrete and cyanide) and equipment to conduct operations. Market prices of commodities and equipment can be subject to volatile price movements, occur over short periods of time and are affected by factors that are beyond the control of the Company. The shortage of such commodities and equipment or any significant increase of their cost could have a material adverse impact upon the Company’s ability to carry out its operations, and could affect the economic viability of the Company’s projects.

Documents

ATLANTIC GOLD CORPORATION MANAGEMENT ...atlanticgoldcorporation.com/_resources/financials/AGB-Q2...4 OVERVIEW OF THE COMPANY’S HOLDINGS MRC PROJECT The MRC Project currently comprises